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Rent control rumored to be driving apartment sales

Original post made on Aug 14, 2017

Mountain View's rent-control program has already survived political and legal trials -- but what about the business test? An increasing number of apartment owners appear to be cashing out rather than working under the new restrictions.

Read the full story here Web Link posted Monday, August 14, 2017, 3:47 PM

Comments (29)

Posted by Jerry
a resident of Gemello
on Aug 14, 2017 at 4:54 pm

"Just the specter of rent control in the days leading up to the election caused Mountain View's affected apartments to drop in value by 25 percent, or about $100,000 per unit,"

"The only people who can pay the prices now are developers."
""Only rich people or corporations can buy these apartments now,"

If prices are dropping then how can only the rich buy them?

Posted by eric
a resident of another community
on Aug 14, 2017 at 5:06 pm

@Jerry-- its not that "the rich" are buying them. Big developers who are just looking at the land value are taking advantage of a shift in valuations. A building that would have been too expensive to make sense out of buying just to tear down is now priced so the bean counters say, bring on the bulldozers. Their deep pockets mean they can handle the cost of the massive new building-- out of reach of the mom and pop owners. New building is exempt from rent control so rents go way up.

Posted by Kyle
a resident of Monta Loma
on Aug 14, 2017 at 10:42 pm

Hopefully we cash in on some higher property taxes. Great news!

Posted by Jes' Sayin'
a resident of Another Mountain View Neighborhood
on Aug 14, 2017 at 11:33 pm

What happens when you try to control market forces by laws. The law of supply and demand trumps every time. Remember when Nixon set wage and price controls and how badly that turned out?

Posted by Hugh Janus
a resident of Shoreline West
on Aug 15, 2017 at 8:59 am

So one of the (many) unintended consequences will be that more of the lower-rent crap apartments around town will be torn down and…….. here we go…….. replaced with more expensive housing that people can't afford.

Isn't liberal progressive socialism fun?! Oh well, but at least they tried (and will try again and again until everything is ruined). And this is why liberalism is unsustainable.

Posted by Sustainable
a resident of Monta Loma
on Aug 15, 2017 at 9:13 am


You're entirely right, liberalism is not sustainable. Our capitalist system has ground down the poor to feed the rich, and socialism is the only way to guarantee the basic rights of all people. We should be replacing those old apartments being torn down with true public housing.

Posted by george drysdale
a resident of another community
on Aug 15, 2017 at 9:39 am

Silicon Valley high school students are the best in the nation. Most take college prep economics (basically economics 101 in college) in order to graduate. The slower students take economics classes which shows you how to keep your check book straight, etc. Rent control is the most studied subject n economics. It is literally like bombing your community (financially and morally). Mountain View is to become a feast for students of history, economics and psychology. I'd hate to be defending rent control on the commission. There will be an initiative overthrowing rent control after the feast. Education is everything. Mountain View is now a province of Venezuela. Noack is doing a good job. San Jose has been put on notice.
George Drysdale going to provide a good belly laugh for Silicon Valley

Posted by Here we go again
a resident of Another Mountain View Neighborhood
on Aug 15, 2017 at 10:33 am

Another duplication of an existing online article, another re-starting of a discussion that was already underway for several days: Web Link

I guess people commenting here don't bother first checking the Town Square page before commenting, even though this website has a well-known longtime history of duplicating online copies of articles.

Posted by William Hitchens
a resident of Waverly Park
on Aug 15, 2017 at 3:59 pm

Makes perfect economic sense. Rent control will make it impossible for owners of rent controlled properties to make a decent return on their investments, or maybe even profits, so it makes sense for them to sell. I approve of this trend because it will help to rid MV of old, unsightly buildings along streets like California, Latham, and Escuela (to name a few) and replace them with attractive, modern, upscale buildings. I hope that most of these replacements will be owner-occupied housing like condos and town houses, and not just more apartments. Also, as someone else pointed out, it will significantly increase MV's property tax income.

Posted by Excellently complete article
a resident of Rex Manor
on Aug 15, 2017 at 4:16 pm

Here is the key point:

> Gundersheim, the CoStar economist, pointed out that his data doesn't show that Mountain View's sell-off is unique. While apartment building sales are up in Mountain View, 2017 is shaping up to be a boom year across the South Bay.

While sales are up they are inline with the overall countywide increase in apartment building sales.

Once again, the jury is still out on what the long-term impact of rent stabilization on Mountain View apartment property values.

However, we DO know the short-/medium-term benefit to the Mountain View residents: A major expense is not going to increase at an unsustainable rate.

I will happily trade a speculative 'scary' story in the future to stop a present day tragic REALITY. I only became a homeowner because I had stable rent.

Posted by Anyone listening?
a resident of North Whisman
on Aug 15, 2017 at 4:58 pm

Clearly, the same people who thought rent control was a brilliant idea, still are unwilling to listen to and understand the economics of what's in store: a frenzy for developers, and insanely high prices new apartments will cannibalize most of what remains of older apartments.

Here's what's happening:
Most of these older apartment buildings that fall under rent control, are owned by private, middle class families. They are selling because this is their lifesavings and the property values are based on rental income and potential rental income. So overnight, these peoples' property values and equity dropped dramatically. The only way to avoid further financial loss is to get out while they can and invest what's left in an area where they their property values will hold, rather than depreciating (relatively) with time. For owners, it's extremely stressful, as they don't have the overhead or the economies of scale to support the additional legal costs incolved in rent control, much less the massive property depreciation and other drains on the middle class owners.

The people who are now investing must pay all the overhead costs and be "the bad guys" who evict tenants prior to destroying the building and rebuilding. These small, older properties are run by small landlords who live nearby, have compassion for their tenants, and work hard to retain good tenants. They don't have the capital, or access to the amount of capital required to rebuild. They also don't have the heart for it. So they're out, or they're broke. A long, slow draining of their life savings. The implementation of rent control has unfairly targeted an demonized small family owned businesses. The ONLY INVESTORS IN THESE RENT CONTROLLED PROPERTIES are large corporations with the huge overhead required to leverage the costs of vacancy and rebuilding without the benefit of rental income to support the costs. The only small investors who would buy these properties are fools.

Once the existing tenants win the lottery, they will move out. The buildings will be torn down, new ones will go up. The new ones are exempt from rent control. The tenants who were evicted won the lottery. So what? Now the only apartments available are three times the cost of their market value rent. This is because the only apartments available are luxury units, owned by large corporations that can afford vacancies, so they won't be lowering rents much even in a bad market.

The rent control is a recipe for destruction of beautiful old buildings, some just old, but still loved. These will be replaced by larger buildings with smaller, more compact, expensive living units.

Get it?

Posted by mvresident2003
a resident of Monta Loma
on Aug 15, 2017 at 5:32 pm

mvresident2003 is a registered user.

No, they're not listening and no, they don't get it. All "they" see is a perceived reduction in immediate rent. Unfortunately and through no fault of their own....they were sold a story by do-gooder/idealistic organizations who are pushing social agendas and using them as Guinea pigs and "fall guys".

And I wouldn't doubt that large developers are behind it as well as they know ultimately they'll benefit.

It's sad, all around.

Posted by Apartment dweller
a resident of Another Mountain View Neighborhood
on Aug 15, 2017 at 7:46 pm

I live in a rent controlled apartment but I agree rent control was a terrible idea.
However I am more than fine with it, if it helps, as one of the posters above noted, to get rid of old apartments along California/Latham/Escuela. First, middle class neighbors from SFHs in the area would hopefully be able to send their kids to Castro Elementary again. Also, increased property taxes revenue will hopefully make all schools, including Castro, better.

Posted by Interesting
a resident of another community
on Aug 16, 2017 at 1:17 am

Interesting. Forest Casa Real is a local real estate investor with some savvy. See and look at the Key people. Loads of properties.

So doesn't this sale indicate Rent Control encouraged his investment in the property? Also, selling a property after 2 years isn't exactly an earth shattering rebuke from the Fremont owner. Not like a long time investor sold out in disgust. The long time investor was the buyer.

Posted by Landlord propoganga
a resident of Another Mountain View Neighborhood
on Aug 16, 2017 at 8:46 am

Landlords are gearing up for the repeal of rent control next year with largely FAKE stories about how it "does not work."

Posted by george drysdale
a resident of another community
on Aug 16, 2017 at 10:26 am

The reason for the sell off of apartments in the South Bay was because the San Jose city council set a new rent control up with the helper "just cause evictions." You want investors in apartment houses, not refugees. California is way different from other states in regard for property rights and wanting more housing. Rent control is the single greatest cause of the low supply of rentals in the Bay Area, demand is high but political will is corrupt. Again, the Mountain View city council understands this except for the one cynic. People forget economics but they can be refreshed in their thinking as I did when I got rent control out of Capitola. Now we have the internet to remind but you do need teachers because some people rationalize their own selfish behavior all the time George Drysdale a social studies teacher

Posted by Fed up landlord-SOLD
a resident of Another Mountain View Neighborhood
on Aug 16, 2017 at 8:44 pm

Layer economic obsolescence on top of the functional obsolescence many property owners already experience seven days/week with their 50+ year old properties, and the picture becomes very clear about the future of MV's more affordable rental units. Spend money upgrading the apartments with new copper plumbing, grounded electrical circuits, fire sprinklers, replacing failing sewer lines and adding cosmetic/functional updates or turn the land over to a developer to scrape and rebuild as row houses for sale? It's a very simple decision. Live with a modest return on investment forever, with no hope of capital appreciation, or move on. Better opportunities are aplenty elsewhere.

After 50+ years owning a large complex providing needed affordable housing, the wrecking ball is moving into position. 100+ residents will soon be scrambling for new housing. You can thank your neighbors who voted for Measure V.

Measure V promoters and the RHC should at least be required to study and hopefully understand the very basics--Real Estate Principals 101: Economic & Functional Obsolescence. Measure V has brought housing obsolescence to Mountain View overnight. To borrow a phrase from Shark Tank, "I'm out." Good luck Mountain View.

Posted by Not so Fast
a resident of another community
on Aug 16, 2017 at 9:52 pm

What about 1696 Villa Street? There are 19 affordable apartments that will be torn
down for that project. In return, Prometheus will build 240 new apartments and also provide 30 affordable units, located nearby, and also a large park nearby too.

So 19 affordable units would become 30 affordable units, and also 240 market rate
units would be added. You can bet Prometheus will make a bundle on that.

Posted by Perseus
a resident of Another Mountain View Neighborhood
on Aug 16, 2017 at 11:13 pm

"So 19 affordable units would become 30 affordable units, and also 240 market rate
units would be added."

It seems like you may be conflating the terms 'affordable' and 'rent controlled'. The two terms are not necessarily equal. As used in your sentence above, 'affordable' is a pretty nebulous term...but one thing it FOR SURE does not mean, is rent controlled.

Posted by george drysdale
a resident of another community
on Aug 17, 2017 at 10:35 am

One last word on the production of housing. The most basic chart in economics where supply intersects with demand. On the internet, it's complicated. "Dead weight loss." That's what "affordable housing" amounts too. Labor is well aware of it's negative effects. Talk to the labor council of construction workers. With rent control you have the customer setting prices, remarkable. But it sure gets votes for unscrupulous politicians. Mountain View's city council is set up to get a straight A report card in economics. George Drysdale a social science teacher

Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Aug 17, 2017 at 1:11 pm

The Business Man is a registered user.

In response to george drysdale

You stated this statement:

“With rent control you have the CUSTOMER SETTING PRICES, remarkable.”

What you as an economics promoter failed to understand, the CUSTOMER always dictates the PRICES IN THE MARKET. Only where there is market manipulation does this fact not exist.

Just observe this information:

“Prices can change for many reasons (technology, CONSUMER PREFERENCE, weather conditions). The relationship between the supply and demand for a good (or service) and changes in price is called elasticity. Goods that are inelastic are relatively insensitive to changes in price, whereas elastic goods are very responsive to price….

Of course, most markets are imperfect; they are not composed of unlimited buyers and sellers of virtually identical items who have perfect knowledge. At the other end of the spectrum from perfect competition is monopoly. IN A MONOPOLY, THERE IS ONE SUPPLIER OF A GOOD FOR WHICH THERE IS NO SIMPLE SUBSTITUTE. The supplier does not take the market price as a given. INSTEAD, THE MONOPOLIST CAN SET IT. (Monopoly’s twin is monopsony, in which there is only one buyer, usually a government, although there may be many suppliers.)”( Web Link)

It would seem your promoting that the market should be dictated by a MONOPOLY or an OLIGOPOLY of suppliers defined as:

What is an 'Oligopoly'

Oligopoly is a market structure in which a small number of firms has the large majority of market share. An oligopoly is similar to a monopoly, except that rather than one firm, two or more firms dominate the market. There is no precise upper limit to the number of firms in an oligopoly, BUT THE NUMBER MUST BE LOW ENOUGH THAT THE ACTIONS OF ONE FIRM SIGNIFICANTLY IMPACT AND INFLUENCE THE OTHERS.( Web Link)

Another term is a CARTEL. Anyway the existence of a monopoly or an oligopoly in effect ELIMINATES THE FREE MARKET VALUE CORRECTION PROCESS. I cannot understand why you do not understand this.

The end result is that your political position is that the CUSTOMER must not have any power over the market, The SUPPLIER must DICTATE the market. That is NOT FREE-MARKET, IT IS MONOPOLISTIC OR OLIGOPOLISTIC, and is ANTITHETICAL TO OUR CAPITALISTIC FREE MARKET AND MUST BE PREVENTED AT ALL COST.

Posted by Affordable Housing
a resident of another community
on Aug 17, 2017 at 2:16 pm

Affordable Housing is defined in state law related to very low income and low income tenants. Effectively it's a lower priced housing than any rent control system, since it adjusts the rent of each tenant based on household income.

With the rising income levels of the tech elite, it's particularly important in an area like Mountain View to provide some housing for the less fortunate.

So, it has zero effect on market priced housing, because it serves a different customer base who would otherwise not even participate in the local market.

Posted by Chuck
a resident of Monta Loma
on Aug 19, 2017 at 11:52 am

Thou shall not mess with the free market.

Its going to be Biblical when the whole man made affordable rental housing thing crashes.

Mountain View renter residents have no idea of the financial opportunities that are available outside their little bubble city.
The moneys moving folks as landlords bulldoze their buildings for the dirt that lies under them and reinvesting elsewhere. The land is worth more now without a rent controlled building sitting on it.
Everyone renting better get ready to pony up $500K to buy there $1.5M slice of pie in the American dream.
Absolute stupidity on the part of the renting voters.
This is as stupid as having the government administering health care. Affordability is going to skyrocket.

Posted by Bernardo
a resident of North Whisman
on Aug 19, 2017 at 5:14 pm

Thank you voters

I am a renter in Mountain View that just got notice of the sale of our apartment building to a developer. Our building is going to be torn down in April of next year. They called it red tagged for demolition.
I pay $2350 per month in rent for my 2 bedroom and my landlord always fixed everything making it a nice home for my 3 children for the last 11 years. I am looking to move but can't find anything. We have 65 families here like us in these buildings and I saw 6 apartments for under $3000 per month that are available that are not good. Where are we all going to move?
I am so sad that Mountain View is being torn down and rebuilt into houses for the rich because of the new law.
I saw my friends evicted from apartments last year because of this new law and people like us are going to have to move in the future because of this to.
What have you done to the not rich people?

Posted by Sustainable
a resident of Monta Loma
on Aug 19, 2017 at 6:04 pm

Sorry, Bernardo, but unless you tell us what building this is, we all must conclude that this is simply fake news from landlords.

Posted by Chuck
a resident of Monta Loma
on Aug 19, 2017 at 8:35 pm

[Post removed due to disrespectful comment or offensive language]

Posted by Thomas
a resident of Monta Loma
on Aug 20, 2017 at 2:33 pm

Hey Sustainable,
Wake up, this is only the beginning.
Chuck nailed it.

Posted by ResidentSince1982
a resident of another community
on Aug 20, 2017 at 4:36 pm

ResidentSince1982 is a registered user.

Red tag is a specific term used in the case of a building not safe for occupancy. They don't red tag buildings in advance to take effect 8 months in the future. Something is fishy in some way about that statement. Are they kicking people out now as they should do if the building is that dangerous? Really, I too would like to know what property the resident is living in. 8 months allows time for a proposal to the city to building something new there, maybe, if the ground work has already been laid, which implies that the redevelopment was already planned before the sale.

As for the purported result, it's not so terrible. Development has been happening all over the city. So they tear down 65 units, and building 350 new ones. Isn't that what Google wants?

Posted by True
a resident of Blossom Valley
on Aug 22, 2017 at 2:56 pm

True is a registered user.

Weird....I seem to remember a number of public comments at Council meetings and on these message boards alluding to just this being a likely consequence of rent control.

Hate to say we told ya so but.....

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